Systematic method of recording transactions in the 'general ledger'
Ledger
Divided into sections called accounts
Each account usually starts on a new page
All transactions are recorded into account (T account)
Double entry
Each transaction influences TWO accounts
The money value of the transaction is entered once on the debit side of one account and once on the credit side of another – enter twice hence called double entry
With two equal and opposite entries, balance is maintained across the accounts
Basic Account Classification
Assets – debit side
Liabilities – credit side
Equity – credit side
Income – credit side
Expenses – debit side
EVERY TRANSACTION CAUSES THE VALUE OF THESE ACCOUNTS TO CHANGE
For each account if one side increases the account value the other side decreases it
Recording accounting transactions
1. Determine the two accounts affected
2. Consider the flow of value (when value enters via an account it is debited, when value leaves via an account it is credited
